It’s a familiar yet perplexing story. Your car insurance is coming up for renewal yet your current provider suddenly decide that they want to raise this price – often markedly – so why do they do that? Considering the volume of affiliate referrals coming from websites like CompareTheMarket.com and Confused.com, all of which take a significant slice of the premium, you would think that the renewal is the perfect opportunity to lower the cost of sale and retain a valuable customer.
For many, the sharp spike in the premium drives the customer back to the price comparison websites, and often straight into the hands of a rival car insurance company. So why do car insurance companies raise their price as you come to renew?
The first thing to note is That this last minute price hike affects a huge amount of British motorists. Research looking at 13m car insurance quotes shows that 55 percent of motorists leave their renewal to the final week of their old policy before they renew. 18 percent of those leave it as late as the day their old policy expires before they take action. All of this means that many people are getting seriously stung by these changing prices.
From delving deep into the 13 million car insurance quotes, we can see a serious upward trend in the price as the renewal approaches.
The average price with two weeks to go is £434. Leave it until the final week, and this price becomes £452. Leave it all the way until the final day? £472 becomes the average price for the renewal.
So if all 13 million people left it until the final day, compared to renewing two weeks earlier, then the combined premium rise would be a staggering £494 million pounds sterling.
The average price difference is £38 per premium, so the car insurance industry would be hitting the UK motorist for an additional half a billion pounds of pure profit margin.
That in itself is a big enough reason for the car insurance industry to hike their prices as you comes towards renewal, but how do they justify it?
Principally, the justification loosely lies around the theory that people who leave things to the last minute may be worse drivers, as this is revealing a personality trait that doesn’t fit well with road safety.
Essentially, the car insurance companies are trying to argue that you are more likely to leave journeys to the last minute, rush, speed and comit other driving offences because your generally sloppy with your housekeeping.
So the car insurers argue that these customers are riskier, and according to Mr a garrison, who was behind the research, “this is one reason [why such customers] could end up paying more”
Lessons for motorists to get the best deal
Knowledge is power when it comes to this. Most people looking to renew their insurance are not leaving it to the last minute because their sloppy, but because it doesn’t need fixing until then. You are, after all, still covered
Therefore, its a case of understanding how the car insurers work. Car insurance companies have a very flexible pricing model, with big daily fluctuations. The price you get can relate back to the wider business performance over that day, week or month. There are a lot of factors at play – many of which we will not ever be privy too – but the easiest solution lies in planning your renewal a bit earlier.
Begin your search a little earlier, and remember that most quotes are locked in for 30 days. This allows you to shop around. Therefore, 30 days out from renewal, run a daily search on price comparison services, and get a locked in quote on the best price that day. Then, as your premium comes up to its expiry date, choose the best price from your research.
That one daily search will save you an average of £38 a year, and comes at the price of one quick daily search. So now we know why the car insurance companies raise their prices with days to go and we also know how to beat it.